Vicious Circle on Smoking Households in Rural Areas in an Effort to Efficiently Spend on Human Resource Investment

This study aims to examine family welfare in the context of a vicious circle between investment in human resources and cigarette consumption. Parents’ decision to allocate their consumption between smoking and investment in human resources will have an effect on the next generation and if this continues, a vicious circle of smoking families will form. Human resources are projected into education and health. The data cited are sourced from IFLS in 1993 and 2014. The method of analysis, the first step, is to apply the simultaneous equation model in the context of the quadratic engle curve by using the 1997 and 2014 IFLS data, we find that cigarette consumption significantly reduces the share of education and health spending. The model also includes the head of the household’s education level. The results show that parent households in rural areas significantly increased spending on education investment when their spending on cigarettes was lower. The condition has a similar pattern with their children’s household. The conclusion is that parents behavior on cigarette spending patterns have a similar effect on the investment in their children’s human resources. So the vicious circle of household smoker continuously happened, especially those who live in rural areas.